The Audit Program - Auditor’s Management Report (AMR)

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					                                                                                          Date Issued 5/02
                                SECTION III – REPORTING
                   CHAPTER 4 – AUDITORS’ MANAGEMENT REPORT (AMR)

                 AUDITORS’ MANAGEMENT REPORT ON ADMINISTRATIVE
                                    FINDINGS
                     FINANCIAL, COMPLIANCE AND PERFORMANCE


The Auditors’ Management Report on Administrative Findings - Financial, Compliance and Performance
(Auditors’ Management Report), is the auditors’ report to the board of education of their findings and
recommendations as a result of the audit. It is issued separately from the CAFR and has the same due
date for submission of November 6, 2002. The report presents the recommendations immediately after
the comments. Since the Department is receiving a separate list of recommendations via the audit
synopsis, repeating the recommendations as a separate list in the Auditors’ Management Report is
optional. Auditors should verify the desired format with their clients. This section provides a sample of
the Auditors’ Management Report. It is not meant to be a boilerplate and should be adapted to the
circumstances of the individual district audit.

The standard format includes
        Table of Contents,
        Report of Independent Auditors,
        Comments
        Findings and Recommendations
        Schedule of Meal Count Activity
        Schedule of Audited Enrollments

A.      The Table of Contents is for organization purposes and is included to assist the reader in
        reviewing the report.

B.      The Report of Independent Auditors provides the reader with the basis and intent of the report as
        well as its distribution. The sample provided in this appendix may be expanded to include an
        opinion on the report if that is the individual firm's policy. Either format would be acceptable by
        the Department of Education. The report should contain both the firm name as well as the
        signature and license number of the public school accountant. The report should be on firm
        letterhead and dated the same as the auditor’s reports included in the CAFR.

C.      The Comments, Findings and Recommendations section includes both general comments that are
        required for all districts regardless as to whether there is an accompanying recommendation and
        other items noted during the audit that require comments and recommendations, including a
        repeat of any items contained in a separate schedule of findings and questioned costs included in
        the single audit section of the district's CAFR. The comments and recommendations must be
        specific under the following applicable headings:

        1.     Administrative Practices and Procedures
        2.     Financial Planning, Accounting and Reporting
        3.     School Purchasing Programs
        4.     School Food Service
        5.     Student Body Activities
        6.     Application for State School Aid
        7.     Pupil Transportation
        8.     Facilities and Capital Assets
        9.     Miscellaneous
        10.    Follow-up on prior year findings


                                                  III-4.1
                                                                                    Date Issued 5/02

Recommendations must be included for all negative comments and areas of noncompliance cited, and
at a minimum they are to be grouped in the above headings. The auditor may use subgroupings
within these headings.

Comments must include discussion on the following areas and detailed examples are shown on
subsequent pages:

   Fire Insurance Coverage
   Surety Bonds as to Adequacy (see Note and table below)
   Whether appropriate billing adjustments have been made for tentative and actual tuition charges.
   Examination of Claims
   Salary Accounts
   That encumbrances, contracts, salaries and expenditures for state and federally funded projects
   were in accordance with laws and regulations and in conformity with procurement requirements.
   A certification that district funds were provided and expended in the proper GAAP account/code
   based upon audit testing of transactions. The comment must include a summary of the sample
   selection process, conclusions reached and additional procedures performed, if any.
   Whether the district has accurately completed its requests for social security reimbursement for
   TPAF members.
   Advertisement for bids in accordance with statutory requirements. A general statement that bids
   as advertised where required, with all exceptions listed is satisfactory. Any items of
   noncompliance should be listed and Title 18A:18A Public School Contracts Law should be
   quoted.
   Limitation of Principal Amount of Bonds 18A:24-19.
   The condition of the records, with both positive and negative findings for:
      A. Athletic Association
      B. Food Services
      C. Student Activity Funds
      D. Secretary and Treasurer (statuts of Secretary’s accounting records must be noted)
      E. General Fixed (Capital) Asset Records

   Note: The minimum requirements for the surety bond shall be such percentage of the current
   year's school budget as is required in the schedule set forth in N.J.A.C. 6A:23-2.5. In fixing the
   minimum bond, the nearest even $1,000 shall be used.
   Up to $100,000                            20% of Budget (Minimum $10,000)
   $100,000.01 to $250,000                   $20,000 + 15% of all over $100,000
   $250,000.01 to $500,000                   $42,500 + 13% of all over $250,000
   $500,000.01 to $750,000                   $75,000 + 8% of all over $500,000
   $750,000.01 to $1,000,000                 $95,000 + 4% of all over $750,000
   $1,000,000.01 to $2,000,000               $105,000 + 2% of all over $1,000,000
   $2,000,000.01 to $5,000,000               $125,000 + 1% of all over $2,000,000
   $5,000,000.01 to $10,000,000              $155,000 + 1/2% of all over $5,000,000
   $10,000,000.01 and upwards                $180,000 + 1/4% of all over $10,000,000

   Per N.J.A.C.6A:23-2.5(c) “The independent school auditor shall verify the adequacy of the
   treasurer’s surety bond which is required by N.J.S.A. 18A:17-32, and shall include appropriate
   comment, and a recommendation, if needed, in the annual school audit report.”
                                            III-4.2
                                                                                          Date Issued 5/02


        Auditor recommendations which are not the result of a required comment or generated by a
        negative finding but rather represent suggestions to management should be grouped together and
        included at the end of the Auditors' Management Report in a section titled "Suggestions to
        Management". Management suggestions are not required to be included in the district's
        Corrective Action Plan.

D. The Schedule of Meal Count Activity documents the number of meals claimed for reimbursement
   under federal subsidy programs in comparison to the number of meals verified during the audit. The
   schedule calculates an (over)under claim based on the differences between the counts and the rates
   effective for the year. A finding and recommendation should be included for any differences noted.

E. The Schedule of Audited Enrollments provides a summary of the results of the audit testing of the
   Application for State School Aid (A.S.S.A.) and the District Report of Transported Resident Students
   (DRTRS). It documents the information reported on the A.S.S.A. in comparison to the district
   workpapers and compares the information in the district workpapers to the underlying supporting
   data, quantifying any errors noted. It also documents the information reported on the DRTRS and the
   amount verified. A finding and a recommendation should be included for any differences noted.

As a reminder, Government Auditing Standards require that the schedule of findings and questioned costs
included in the single audit section of the CAFR present each finding in a format that addresses the
condition (what is), criteria (what should be), effect (the difference between what is and what should be),
cause (why it happened), and recommendation. When repeating the findings in the Auditors'
Management Report, auditors may follow that same format or revise the comment to be consistent with
the other items presented in the Auditors' Management Report. USOMB Circular A-133 (Section .510)
states specific requirements on the reporting of audit findings in the schedule of findings and questioned
costs. Auditors should reference this section in the cases where a federal single audit of the district is
necessary.

N.J.S.A. 18A:23-9 states that the auditor "...report any error, omission, irregularity, violation of law,
together with recommendations, to the board of education of each school district." This statute applies to
the Auditors' Management Report filed with the Department of Education. All findings must be included
in that report of audit. A separate report to the board of education outlining findings not included in the
report of audit is considered a violation of this statute. Sometimes an auditor will detect an error which
requires disclosure pursuant to N.J.S.A. 18A:23-9. However, the auditor may not believe a
recommendation is needed because the error was insignificant and an isolated unintentional deviation
from the Board's standard operating procedure. In such instances, the auditor must report the item as a
finding, state that in his or her opinion no recommendation is necessary, and elaborate on the reason(s) for
this opinion.




                                                  III-4.3
                                                                    Date Issued 5/02

         AUDITORS' MANAGEMENT REPORT ON ADMINISTRATIVE FINDINGS
                 FINANCIAL, COMPLIANCE AND PERFORMANCE

                                        Table of Contents

                                                                 Page No.

Independent Auditors' Report                                        1
Scope of Audit                                                      2
Administrative Practices and Procedures
    Insurance                                                       2
    Official Bonds                                                  2
    Tuition Charges                                                 2
Financial Planning, Accounting and Reporting
    Examination of Claims                                           2
    Payroll Account                                                 2-3
    Reserve for Encumbrances and Accounts Payable                   3
    Classification of Expenditures                                  3-4
    Board Secretary's Records                                       4-5
    Treasurer's Records                                             5-6
    Elementary and Secondary Education Act of 1965, as amended
      by the Improving America's Schools Act of 1994                6
    Other Special Federal and/or State Projects                     6-7
    T.P.A.F. Reimbursement                                          7
    DEPA Accounting                                                 7
School Purchasing Programs
    Contracts and Agreements Requiring Advertisement for Bids       7-9
School Food Service                                                 9-11
Student Body Activities                                             11
Application for State School Aid                                    11
Pupil Transportation                                                11-12
Facilities and Capital Assets                                       13
Miscellaneous                                                       13
Follow-up on Prior Year Findings                                    13
Acknowledgment                                                      13
Schedule of Meal Count Activity                                     14
Schedule of Audited Enrollments                                     15-16




                                             III-4.4
                                                                                         Date Issued 5/02




                                           SAMPLE ONLY


                                     Report of Independent Auditors


Honorable President and
Members of the Board of Education
                        School District
County of              , New Jersey

We have audited, in accordance with generally accepted audit standards and Government Auditing
Standards issued by the Comptroller General of the United States, the general purpose financial
statements (N-1) of the Board of Education of the                        School District in the County of
                for the year ended June 30, 20__, and have issued our report thereon dated
       , 20 __.

As part of our audit, we performed procedures required by the New Jersey Department of Education, and
the findings and results thereof are disclosed on the following pages, as listed in the accompanying table
of contents.

This report is intended for the information of the        Board of Education's management and
the New Jersey Department of Education. However, this report is a matter of public record and its
distribution is not limited.




                                                Licensed Public School Accountant
                                                No.
                                                Firm Name

Date




(N-1) The Report for districts which have implemented GASB 34 would refer to basic financial
statements.




                                                 III-4.5
                                                                                        Date Issued 5/02

                  Administrative Findings - Financial, Compliance and Performance


Scope of Audit

The audit covered the financial transactions of the Board Secretary/School Business Administrator and
the Treasurer of School Moneys, the activities of the Board of Education, and the records of the various
funds under the auspices of the Board of Education.


Administrative Practices and Procedures

Insurance

Fire insurance coverage was carried in the amounts as detailed on Exhibit J-13, Insurance Schedule
contained in the district's CAFR.

Official Bonds

Name                            Position                                          Amount

Anne Edwards            Board Secretary/School Business Administrator           $10,000.00
                        Business Administrator

Michael E. Leonard      Treasurer                                               145,000.00

There is a Public Employees' Faithful Performance Blanket Position Bond with the Western Surety
Company covering all other employees with multiple coverage of $10,000.00.

Tuition Charges

A comparison of tentative tuition charges and actual certified tuition charges was made. The actual costs
were less than estimated costs. The Board made a proper adjustment to the billings to sending districts
for the decrease in per pupil costs in accordance with N.J.A.C. 6A:23-3.1(f)3.


Financial Planning, Accounting and Reporting

Examination of Claims

An examination of claims paid during the period under review did not indicate any discrepancies with
respect to signatures, certification or supporting documentation.

Payroll Account

The net salaries of all employees of the Board were deposited in the Payroll Account. Employees' payroll
deductions and employer's share of fringe benefits were deposited in the Payroll Agency Account.

All payrolls were approved by the Superintendent and were certified by the President of the Board and the
Board Secretary/Business Administrator.

Salary withholdings were promptly remitted to the proper agencies.


                                                 III-4.6
                                                                                             Date Issued 5/02

Payroll Account (cont’d)

Finding:
Some employees were paid in excess of their approved contract amounts.

Recommendation:
All employees should be paid in strict accordance with their approved contracts.


Reserve for Encumbrances and Accounts Payable

A review of outstanding issued purchase orders was made as of June 30 for proper classification of orders
as reserve for encumbrances and accounts payable.

Finding:
District personnel did not perform an analysis of outstanding purchase orders at June 30 and prepare the
separate listings of purchase orders comprising the balance sheet account balances for accounts payable
and reserve for encumbrances. Numerous audit adjustments were needed to adjust the accounting records
to properly reflect the true balances as of June 30, taking into consideration both the status of the orders at
June 30 as well as their subsequent liquidation.

Recommendation:
Purchase orders should be reviewed for proper classification at June 30 as accounts payable or reserve for
encumbrances based upon whether the goods have been received or the services rendered. All orders that
will not be liquidated within the suggested time frame of 60 to 90 days of year-end should be cancelled.
Reconciliations of the adjusted June 30 balances for accounts payable and reserve for encumbrances
should be performed and the required schedules be prepared for the year end audit.


Classification of Expenditures

The coding of expenditures was tested for proper classification in accordance with N.J.A.C. 6A:23-2.2(g)
as part of our test of transactions of randomly selected expenditure items. We also reviewed the coding of
all expenditures included in our compliance and single audit testing procedures. As a result of the
procedures performed, a transaction error rate of 1.90% was noted and no additional procedures were
deemed necessary to test the propriety of expenditure classification.

Finding:
During our test of transactions it was noted that the district misclassified and misbudgeted professional
development costs for non-instructional staff as Improvement of Instruction Services/Other Support
Services-Instructional Staff - Other Purchased Professional and Technical Services. The expenditure and
related appropriation was reclassified to Business and Other Support Services - Purchased Professional
Services for financial statement presentation purposes.

Recommendation:
Districts should reference The Uniform Minimum Chart of Accounts (Handbook 2R2) for New Jersey
Public Schools and other available reference materials, such as the Budget Guidelines for the proper
classifications required to be in compliance with N.J.A.C. 6A:23-2.2(g).

Finding:
The expenditure for substitute teacher salaries was not charged to the appropriate line item account in
accordance with The Uniform Minimum Chart of Accounts (Handbook 2R2) for New Jersey Public
Schools. The amount was reclassified for financial statement presentation, resulting in a deficit in the
proper line item account.
                                                 III-4.7
                                                                                          Date Issued 5/02

Classification of Expenditures (cont’d)

Recommendation:
Districts should reference The Uniform Minimum Chart of Accounts (Handbook 2R2) for New Jersey
Public Schools and other available reference materials, such as the Budget Guidelines, for the proper
classifications required to be in compliance with N.J.A.C. 6A:23-2.2(g).


Board Secretary's Records

Our review of the financial and accounting records maintained by the board secretary disclosed the
following items.

Finding:
Bids received were not summarized in the minutes (N.J.S.A. 18A:18A-21).

Recommendation:
Bids received should be summarized in the minutes of the Board Secretary.

Finding:
Acknowledgment of the Board's receipt (non-receipt) of the Board Secretary's and Treasurer's monthly
financial reports was not included in the minutes.

Recommendation:
The Board should acknowledge in the minutes receipt (non-receipt) of the Board Secretary's and
Treasurer's monthly reports.

Finding:
Budget appropriations were greater than realized revenues and board authorized use of surplus. The
Board Secretary was aware of the revenue shortfall at least six months prior to the fiscal year end, but did
not request that the Board make corresponding adjustments and or/appropriate surplus in order to balance
the budget.

Recommendation:
In the event of a shortfall in budgeted revenues, the Board Secretary should request that the Board adjust
appropriations and/or make appropriations of surplus in order to balance the budget.

Finding:
Several budgetary line accounts were overexpended during the fiscal year and at June 30 despite the
board secretary's monthly certification to the contrary (N.J.A.C. 6A:23-2.11).

Recommendations:
Approved budgetary line accounts should not be overexpended. The Board Secretary should not approve
the issuance of purchase orders that would cause an overexpenditure in the line account to be charged,
prior to the Board approving the requested transfer of additional appropriations to cover such orders.

The Board Secretary should file monthly certifications of the budgetary line item status which are
consistent with the actual budgetary records.

Finding:
Payments were made prior to the receipt of goods.

Recommendation:
Payment should not be made until the receipt of goods.
                                                 III-4.8
                                                                                        Date Issued 5/02

Board Secretary's Records (cont’d)

Finding:
The general fixed asset records were not updated for the additions and disposals of general fixed assets
made during the year.

Recommendation:
Once the general fixed assets account group has been established in the general ledger, it should be
updated periodically (at least monthly) for additions and disposals.


Treasurer's Records

The following items were noted during our review of the records of the Treasurer.

Finding:
The Treasurer did not perform cash reconciliations for the general operating account, payroll account, or
payroll agency account (N.J.S.A. 18A:17-36).

Recommendation:
Each month, the Treasurer should determine cash balances by performing cash reconciliations for the
general operating account, payroll account, and the payroll agency account.

Finding:
Not all cash receipts were promptly deposited.

Recommendation:
The Treasurer should promptly deposit all cash receipts.

Finding:
The Treasurer's records were not in agreement with the records of the Board Secretary. Also, the
Treasurer's cash balance for the general operating account was not in agreement with the reconciled cash
balance as determined during the audit.

Recommendation:
The Treasurer should reconcile his cash records with the reconciled bank statements and the cash records
of the Board Secretary.


Elementary and Secondary Education Act of 1965 (E.S.E.A.), as amended by the Improving America's
Schools Act of 1994

The E.S.E.A. financial exhibits are contained within the Special Revenue Section of the CAFR. This
section of the CAFR documents the financial position pertaining to the projects under Titles I and VI of
the Elementary and Secondary Education Act as amended.

The study of compliance for E.S.E.A. indicated the following areas of noncompliance and/or questionable
costs.

Finding:
Salary charges were not documented each pay period.         Allocated salary charges for teaching staff
members were not supported by employee time sheets.


                                                 III-4.9
                                                                                            Date Issued 5/02

Elementary and Secondary Education Act of 1965 (E.S.E.A.), as amended by the Improving America's
Schools Act of 1994 (cont’d)

Recommendation:
The allocation of salaries among federal/state grants should be supported by employee time sheets.

Findings:
Three A.B.C. computers and software costing $3,300 were charged to Title I-Part A. These items were
not labeled Title I nor were they located in the designated Title I classrooms. The computer equipment
and software were located in an area utilized by the general school population. (Serial Nos. XXXXX,
XXXXX and XXXXX)

Printing costs of $1,200 for a brochure unrelated to E.S.E.A. were charged to the Title I-Part A grant.

Recommendation:
Only those costs associated with the federal/state grants should be charged to the grant.

Findings:
Due to Grantor balances were not returned/disposed of in accordance with the grant agreement.

Recommendation:
Due to Grantor balances must be returned immediately with the submission of the final grant
expenditure report.


Other Special Federal and/or State Projects

The district's Special Projects were approved as listed on Schedule A and Schedule B located in the
CAFR.

Our audit of the federal and state funds on a test basis, indicated that obligations and expenditures were
incurred during the fiscal year or project period for which the project was approved.

The financial exhibits are contained within the Special Revenue Section of the CAFR. This section of the
CAFR documents the financial position pertaining to the aforementioned special projects.

The study of compliance for the special projects indicated the following areas of noncompliance.

    I.D.E.A. Part B

    Finding:
    Separate accounting was not maintained for each approved project.

    Recommendation:
    The Board Secretary should maintain separate accounting with the account coding structure of the
    minimum outline for each state approved project within a federal/state grant program.

    Finding:
    Grant application approvals and acceptance of grant funds were not made by board resolution or
    recorded in the minutes.

    Recommendation:
    All filings of federal and state grant applications and subsequent acceptance of grant funds should be
    approved by board resolution and recorded in the minutes.
                                                   III-4.10
                                                                                         Date Issued 5/02


T.P.A.F. Reimbursement

Our audit procedures included a test of the biweekly reimbursement forms filed with the Department of
Education for district employees who are members of the Teachers Pension and Annuity Fund. No
exceptions were noted.

DEPA Accounting

The school district’s accounting records for Demonstrably Effective Program Aid (DEPA) were
maintained in accordance with N.J.A.C. 6:19-4.2(b), which states that the district board of education must
maintain separate program and service accounts at the school-level in the special revenue fund using the
uniform grant project budget statement coding structure. In addition, budgeted DEPA allocations by
school were equal to or greater than the original school allocation as listed on the State Aid printout.


School Purchasing Programs

Contacts and Agreements Requiring Advertisement for Bids

Note: Effective April 17, 2000, N.J.S.A. 18A:18A (Public School Contracts Law) was revised by
P.L.1999, c.440 (originally known as Assembly bill No. 3519). The associated rules were drafted by the
Department of Local Government Services, with consultation from the Commissioner of Education.
Auditors are advised to follow the amended law when auditing procurements made after April 17, 2000.
Information on the changes, the statute, and school contracts in general is available on the website
http://www.state.nj.us/njded/pscl/index.html.

Auditors should refer to Section I, Chapter 5, Bids & Contracts/Purchasing which has been revised to
includes quotes of N.J.S.A. 18A:18A-3 and 4 amended April 17, 2000.

Effective April 17, 2000 and thereafter the bid thresholds in accordance with N.J.S.A. 18A:18A-3 (as
amended) and 18A:39-3 are $17,500 and $12,800 respectively.

The board of education has the responsibility of determining whether the expenditures in any category
will exceed the statutory thresholds within the contract year. Where question arises as to whether any
contract or agreement might result in violation of the statute, the Solicitor's opinion should be sought
before a commitment is made.

Inasmuch as the system of records did not provide for an accumulation of payments for categories for the
performance of any work or goods or service, the results of such an accumulation could not reasonably be
ascertained. Disbursements were reviewed, however, to determine whether any clear-cut violations
existed.

The results of my examination indicated that no individual payments, contracts, or agreements were made
for the performance of any work or goods or services, in excess of the statutory thresholds where there
had been no advertising for bids in accordance with the provision of N.J.S.A. 18A:18A-4, amended.

Resolutions were adopted authorizing the awarding of contracts or agreements for "Professional Services"
per N.J.S.A. 18A:18A-5.




                                                 III-4.11
                                                                                          Date Issued 5/02

The system of records did not provide for an accumulation of purchases for which the school board used
contracts entered into by the State Department of Purchase and Property pursuant to Ch. 114, P.L. 1977,
therefore, the extent of such purchases could not reasonably be ascertained. My examination did reveal
however, that the following purchases were made through the use of state contracts:

                                Fuel Oil
                                Art Supplies
                                Microcomputers
                                Copy Machine Lease
                                Small Tools
                                Audio-Visual Equipment


Finding:
A Widget computer costing $18,000.00, not manufactured in the United States, was purchased even
though bids submitted for American made computers met the specifications (N.J.S.A. 18A:18A-20,
amended). (Serial No. XXXX)

Recommendation:
American goods and products should be used where possible.

Finding:
Notice of revisions to bid specifications for purchase of telephone equipment (non construction contracts)
was not provided to a vendor who had received a bid package. (N.J.S.A.18A:18A-21c, amended)

Recommendation:
The district should notify any person who has submitted a bid or received a bid package of revisions to
bid specifications. One of three permissible means of notification should be used a) in writing by
certified mail, b) by certified facsimile transmission, i.e., the sender's facsimile machine produces a
receipt showing date and time of transmission and that the transmission was successful or c) by a delivery
service that provides certification of delivery to the sender.

Finding:
The purchase of a Fun video center costing $19,500.00 and designated as made pursuant to a state
contract was awarded to a vendor who did not have the state contract for the specific equipment
purchased, according to the state contract award bulletin on file in the district's office.

Recommendation:
Contracts awarded to vendors pursuant to a state contract should be made for only those items specifically
included in the state contract award bulletin for such vendor.

Finding:
Bids received, resulting in a capital improvement costing $23,000.00, performed by MLA Construction
Co., were not publicly unsealed and announced in the presence of the parties bidding or their agents
(N.J.S.A. 18A:18A-21, amended).

Recommendation:
All bids should be unsealed and announced publicly in the presence of the parties bidding or their agents.




                                                 III-4.12
                                                                                        Date Issued 5/02

School Food Service

The financial transactions and statistical records of the school food services were maintained in
satisfactory condition. The financial accounts, meal count records and eligibility applications were
reviewed on a test-check basis.

Finding:
The number of meals claimed for reimbursement was verified against sales and meal count records. As
part of the claims review process the Edit Check Worksheet was completed. Reimbursement vouchers
were not timely filed, and meals claimed did not agree with meal count records resulting in an overclaim,
as detailed on the Schedule of Meal Activity.

Recommendation:
Prior to submitting reimbursement vouchers to the U.S. Department of Agriculture, the meals claimed
should be verified to the meal count activity records.
Applications for free and reduced price meals were reviewed for completeness and accuracy (note any
exceptions). The number of free and reduced price meals claimed as served did not exceed the number of
valid applications on file, times the number of operating days, on a school by school basis. The free and
reduced price meal and free milk policy is uniformly administered throughout the school system. Sites
approved to participate in Provisions complied with all counting and claiming requirements. The required
verification procedures for free and reduced price applications were completed and available for review.
Expenditures were separately recorded as food, labor and other costs. Vendor invoices were reviewed
and costs verified. Inventory records on food supply items were currently maintained and properly
applied in determining the cost of food and supplies used.
Time sheets were reviewed and labor costs verified. Payroll records were maintained on all School Food
Services employees authorized by the board of education.
The cash disbursements records reflected expenditures for program related goods and services (note any
exceptions). Districts with food service management companies are depositing and expending program
monies in accordance with N.J.S.A. 18A:17-34, and 19-1 through 19-4.1. The appropriate revenue and
expenditure records were maintained in order to substantiate the non-profit status of the school food
service. Net cash resources did not exceed three months average expenditures.
Food Distribution Program commodities were received and a separate inventory was maintained on a
first-in, first-out basis.

Exhibits reflecting Child Nutrition Program operations are included in the section entitled Enterprise
Funds, Section F of the CAFR (GASB 34 Model – Section G).

        Auditor's Note: The AICPA Statement of Position 98-3, section 5.13 defines food
        commodities distributed as non-cash federal financial assistance. The total value
        of the commodities received as well as the value distributed by school districts
        must be reflected as revenue and expenditures, respectively, in the Schedule of
        Expenditures of Federal Awards.

        In the event that commodity inventories are not maintained sufficiently to allow
        the auditor to include this activity in the financial statements and schedules, a
        negative finding and recommendation must be included in the Auditors'
        Management Report.




                                                III-4.13
                                                                                             Date Issued 5/02

School Food Service (cont'd)
        Also, in accordance with AICPA Statement of Auditing Standards (SAS) #70, as
        amended by SAS 88 (effective February, 2000) auditors must obtain an
        understanding of internal controls placed in service by service organizations
        whose services are part of the entity’s information system. Food service
        management companies must have a service audit performed by an independent
        audit firm engaged by the food service management company. This service audit
        must report on the food service management company's control structure policies
        and procedures. It is the responsibility of the school district management to
        award contracts to a food service management company only if such a service
        audit report has been issued. The requirement for provision of the SAS 70 report
        has been incorporated into the standard Food Service Management Company
        Contract. If the local school district is unable to provide such a service audit to
        the local school district auditor, a negative finding and recommendation must be
        included in the Auditors' Management Report.


Student Body Activities

During our review of the student activity funds, the following items were noted.

Finding:
The Board had no policy that clearly established the regulation of student activity funds.

Recommendation:
The Board should approve a policy establishing the regulation of student activity funds.

Finding:
Not all cash receipts were promptly deposited.

Recommendation:
All cash receipts should be promptly deposited.

Finding:
Not all cash disbursements had proper supporting documentation.

Recommendation:
Proper supporting documentation should be maintained for all cash disbursements.


Application for State School Aid

Our audit procedures included a test of information reported in the October 15, 2001 Application for State
School Aid (A.S.S.A.) for on-roll, private schools for the handicapped, low-income, and bilingual. We
also performed a review of the district procedures related to its completion. The information on the
A.S.S.A. was compared to the district workpapers without exception. The information that was included
on the workpapers was verified without exception. The results of our procedures are presented in the
Schedule of Audited Enrollments.

The district maintained workpapers on the prescribed state forms or their equivalent.

The district has adequate written procedures for the recording of student enrollment data.

                                                  III-4.14
                                                                                           Date Issued 5/02


Pupil Transportation

Our audit procedures included a test of on roll status reported in the 2001-2002 District Report of
Transported Resident Students (DRTRS). The information that was included on the DRTRS was verified
to the DRTRS Eligibility Summary Report without exception. The results of our procedures are
presented in the Schedule of Audited Enrollments.

Our procedures also included a review of transportation related contracts and purchases. Based on our
review, the district complied with proper bidding procedures and award of contracts. The bid
specifications for the purchase of buses were in compliance with applicable statutes. No exceptions were
noted in our review of transportation related purchases of goods and services.

Facilities and Capital Assets

Our procedures included a review of the EDA grant agreement for consistency with recording EDA
revenue, transfer of local funds from the general fund or from the capital reserve account, and awarding
of contracts for eligible facilities construction.

Finding:
Revenue was recorded prior to signing of the EDA grant agreement.

Recommendation:
Grant revenue should be recorded only after the EDA grant agreement is signed.

Finding:
Contracts were awarded prior to signing of the grant.

Recommendation:
Contracts should only be awarded after the EDA grant agreement is signed.

Finding:
Funds were transferred from the capital reserve account to the capital projects fund prior to signing the
EDA grant agreement.

Recommendation:
Funds may be transferred to the capital projects fund only after the EDA grant agreement is signed.


Follow-up on Prior Year Findings

In accordance with government auditing standards, our procedures included a review of all prior year
recommendations. Corrective action had been taken on all prior year findings with the exception of the
following, which is repeated in this year's recommendations:

        Approved budgetary line accounts should not be overexpended.

(If there were no prior year findings, indicate “Not Applicable” in this section. Do no omit the section.)

Acknowledgment

We received the complete cooperation of all the officials of the school district and I greatly appreciate the
courtesies extended to the members of the audit team.

                                                  III-4.15
                                                                                     Date Issued 5/02



                          SCHEDULE OF MEAL COUNT ACTIVITY

                             ANYTOWN SCHOOL DISTRICT
                                 FOOD SERVICE FUND
                   NUMBER FOR MEALS SERVED AND (OVER) UNDERCLAIM
                                  ENTERPRISE FUND
                      FOR THE FISCAL YEAR ENDED JUNE 30, 200X__

                                                                                          (OVER)
                          MEAL           MEALS            MEALS                           UNDER
     PROGRAM            CATEGORY        CLAIMED          VERIFIED      DIFFERENCE RATE(a) CLAIM
                                                                                            (b)

National School Lunch Paid                 300,000         296,000             (4,000)       .26 $(1,000)
  (Regular Rate)      Reduced               50,000          48,600             (1,400)      1.81 (2,380)
                      Free                   5,820           5,000               (820)      2.21 (1,722)
                            TOTAL          355,820         349,600             (6,220)           $(5,102)

School Breakfast       Paid                     125           125                  -0-           .31       $-0-
  (Regular Rate)       Reduced                  300           360                  60            .95        53

                       Free                   3,868          3,808                (60)      1.25          (71)
                              TOTAL           4,293          4,293                 -0-                   $(18)

Special Milk           Paid                   2,500          2,500                 -0-     .145            $-0-
                       Free                   7,500          7,500                 -0- Average              -0-
                                                                                        Cost
                              TOTAL         10,000          10,000                 -0-                     $-0-


After School Snacks    Paid                     350           350                  -0-           .05        -0-

                       Reduced                   0              0                   0            .28         0
                       Free(Area               475            501                  26            .57        14
                       Eligible)
                               TOTAL            825           851                  26                      $14

TOTAL NET                                                                                              $(5,106)
OVERCLAIM


   (a)     Reimbursement rates are subject to annual change. Rates indicated here are for
           illustrative purposes only. See appropriate rates in Section II, Chapter 50 - Child
           Nutrition Program Requirements.

   (b)     Overclaims or underclaims must be reflected by program on the Schedule of Findings
           and Questioned Costs.




                                              III-4.16
                                                                                                                      ANYTOWN SCHOOL DISTRICT
           SCHEDULE OF AUDITED ENROLLMENTS                                                                    APPLICATION FOR STATE SCHOOL AID SUMMARY
                                                                                                                            ENROLLMENT AS OF OCTOBER 15, 2001

                                                                                                                                                                                                 On Roll -                                                                   Private Schools -
                                           2002-2003 Application for State School Aid (10/15/01 data)                                    Sample for Verification                              Related Services                   Private Schools for Disabled                Related Services
                                                Reported on             Reported on                                           Sample        Verified per         Errors per             Sample                           Reported on    Sample                         Sample
                                                  A.S.S.A.              Workpapers                                         Selected from      Registers          Registers                for                            A.S.S.A. as       for                           for
                                                  On Roll                 On Roll                   Errors                  Workpapers        On Roll             On Roll               Verifi-    Sample      Sample      Private       Verifi-    Sample    Sample   Verifi-     Sample Sample
                                             Full       Shared       Full        Shared       Full       Shared            Full Shared Full Shared             Full     Shared          cation     Verified    Errors      Schools       cation     Verified  Errors   cation      Verified Errors

           Half Day Preschool                   12                         11                         1                      5                   5
           Full Day Preschool                   25                         25                                                8                   8
           Half Day Kindegarten                 99                         99                                               10                   9                      1
           Full Day Kindergarten               113                        113                                                9                   9
           One                                 111                        112                        (1)                    15                  15
           Two                                 108                        108                                               16                  16
           Three                               112                        112                                               17                  17
           Four                                114                        110                         4                     18                  18
           Five                                107                        107                                               19                  18                      1
           Six                                 110                        110                                               15                  15
           Seven                               111                        111                                               16                  16
           Eight                               109                        109                                               15                  15
           Nine                                110                        110                                               16                  16
           Ten                                 111              2         111              2                                14           2      14          1                     1
           Eleven                              112              1         112              1                                12           1      12          1
           Twelve                              108              1         108              1                                15           1      15          1
           Post-Graduate                        22                         22                                                3                   3
           Adult H.S. (15+CR.)                  12                         11                         1                      1                   1
           Adult H.S. (1-14 CR.)                11                         11                                                2                   2
           Subtotal                          1,617              4       1,612              4          5               0    226           4     224          3           2         1               0          0      0              0             0      0         0             0      0        0
III-4.17




           Tier II-Elementary                  21                          21                                                 4                  4                                                8          8                   16             10      9         1             5      5
           Tier II-Middle School               15                          15                                                 2                  2                                                5          5                   21             13     13                       6      5        1
           Tier II-High School                 18                          18                                                 4                  4                                                4          3      1            18             13     13                       4      4
           Tier III-Elementary                  6                           6                                                 2                  2                                                8          8                   15             11     13        (2)            8      7        1
           Tier III-Middle School               8                           8                                                 3                  3                                                9          8      1            19             12     12                       5      5
           Tier III-High School                 9                           9                                                 3                  3                                                4          4                    8              6      6                       2      2
           Tier IV-Elementary                  14                          14                                                 3                  3                                                4          3      1             9              7      5         2             4      4
           Tier IV-Middle School               13                          13                                                 2                  2                                                7          7                    5              4      4                       3      3
           Tier IV-High School                 15                          15                                                 3                  3                                                4          4                    3              2      2                       1      1
           Subtotal                           119               0         119 0            0          0               0      26          0      26          0           0         0              53         50      3           114             78     77         1            38     36        2

           Co. Voc. - Regular                   35             11          35             11                                15           6      15          6
           Co. Voc. Ft. Post Sec.                6                          6                                                2                   2
             Totals                          1,777             15       1,772             15          5               0    269           10    267          9           2         1              53         50      3           114             78     77         1            38     36        2
                                                                                                                           (a)         (a)                                                 (b)                                            (c)                            (d)
                        Percentage Error                                                          0.28%            0.00%                                           0.74% ######                                  5.66%                                        1.28%                         5.26%


                                                                                                                   Notes to Auditor:
                                                     (a) Sample size obtained from table in Section I, Chapter 3                              (c) Sample size based on total contracts using the table in
                                                          of the Audit Program. Amount tested for each category                                       Section I, Chapter 3 of the Audit Program.
                                                          obtained from workpapers provided by district.
                                                                                                                                              (d) Sample size based on related services students
                                                     (b) Sample size based on related services students                                                from private schools sample size.
                                                          from on roll sample size.
               SCHEDULE OF AUDITED ENROLLMENTS                                                                                   ANYTOWN SCHOOL DISTRICT
                                                                                                                         APPLICATION FOR STATE SCHOOL AID SUMMARY
                                                                                                                              ENROLLMENT AS OF OCTOBER 15, 2001



                                                            Low Income                                                     Sample for Verification                                                         Bilingual Education                 Sample for Verification
                                    Reported on             Reported on                                                                                                                         Reported on      Reported on
                                    A.S.S.A. as            Workpapers as                                    Sample                Verified to                                                   A.S.S.A. as     Workpapers as                   Sample        Verified to
                                       Low                     Low                                       Selected from           Application             Sample                                  Bilingual        Bilingual                  Selected from    Test Score    Sample
                                      Income                  Income                Errors                Workpapers             and Register            Errors                                  Education        Education       Errors      Workpapers     and Register   Errors

           Half Day Preschool                                                                                                                                         Bilingual Students                 102                104        (2)             69             69         0
           Full Day Preschool
           Half Day Kindegarten               25                   24                        1                   10                      10                                 Percentage Error                                        1.96%                                     0.00%
           Full Day Kindergarten              34                   34                                            13                      13
           One                                32                   32                                            14                      14
           Two                                35                   35                                            12                      10                       2
           Three                              31                   32                    (1)                     13                      15
           Four                               36                   36                                            13                      14
           Five                               38                   38                                            12                      12
           Six                                31                   31                                             9                      13
           Seven                              38                   36                        2                   14                      11                       3
           Eight                              36                   36                                            14                      15
           Nine                               29                   29                                            13                      13
           Ten                                28                   28                                            14                      14
           Eleven                             36                   34                        2                   16                      16
           Twelve                             35                   35                                            18                      17                       1
           Post-Graduate
           Adult H.S. (15+CR.)
           Adult H.S. (1-14 CR.)
           Subtotal                       464                     460                        4       0          185                     187                       6
III-4.18




           Tier II-Elementary                  3                    3                                                1
           Tier II-Middle School               2                    2                                                1
           Tier II-High School                 4                    4                                                2
           Tier III-Elementary                 2                    2                                                1
           Tier III-Middle School              1                    1                                                0
           Tier III-High School                5                    5                                                1
           Tier IV-Elementary                  3                    3                                                1
           Tier IV-Middle School               4                    4                                                2
           Tier IV-High School                 2                    2                                                0
           Subtotal                           26          0        26                        0       0               9       0            0          0            0

           Co. Voc. - Regular                  5                    5                                                3                    3
           Co. Voc. Ft. Post Sec.
             Totals                       495                     491                        4                   197                    190                       6
                                                                                                              (e)
           Percentage Error                                                           0.81%                                                                3.05%            Notes to Auditor:
                                                                                                                                                                            (e) Sample size based on total
                                                                                                                                                                                low-income students listed on
                                                                                             Transportation                                                                     workpapers using table in Section I,
                                                   Reported on          Reported on                                                                                             Chapter 3 of the Audit Program.
                                                   DRTRS by             DRTRS by
                                                   DOE/county             District  Errors                  Tested                 Verified              Errors             (f) Sample size obtained from table in Section I,
                                                                                                                                                                                Chapter 3 of the Audit Program
           Reg. - Public Schools, col. 1              1,425                1,425             0                   217                    211                       6                                                                                             Re-
           Reg -SpEd, col. 4                            301                  301             0                    50                     48                       2                                                                            Reported      Calculated
           Transported - Non-Public, col. 2              28                   28             0                     5                      5                       0         Avg. Mileage - Regular Including Grade PK students                        8.7           8.5
           Special Needs, col. 13                        35                   35             0                     7                      6                       1         Avg. Mileage - Regular Excluding Grade PK students                        8.5           8.4
            Totals                                    1,789                1,789             0                   279                    270                       9         Avg. Mileage - Special Ed with Special Needs                             12.4          12.2
                                                                                                              (f)
            Percentage Error                                                                                                                               3.23%

				
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